Is EDUN a success?

edun

In 2008, as part of a conference goodie-bag, I received an EDUN t-shirt. The shirt’s tags indicated my shirt was made in Peru, from organic Peruvian cotton. The small pamphlet attached to it noted that the company, started by Bono and his wife Ali Hewson, was focused on sustainable, ethical and eco-friendly fashions. I remember liking the shirt and the story behind it, especially because my job at the time had me focusing on economic development for small-holder farmers in rural Peru. I liked the idea that not only was the organic cotton produced in Peru, but instead of being exported as a raw material, the value-added product was created there in Peruvian factories, thus enhancing economic returns locally.

Me and my Peruvian-made EDUN shirt

EDUN’s mission though, according to Ali Hewson is to make a profit — not because the executive board needs the money but to demonstrate to other entrepreneurs that it’s possible to do so in developing countries, paying fair wages and relying on local raw material entirely processed and manufactured by local labor, from start to finish.

***

An article entitled “Out of Africa, Into Asia” in Friday’s Wall Street Journal explains how the company decided to move a majority of the production to China because of various issues with the manufacturers in the developing world, particularly in Africa. Delivery delays and quality problems were affecting the clothing line to the point where the company hosted “a party in the dark, at the chic cabaret venue The Box, to draw attention away from the clothes.”

According to the WSJ:

After putting around $20 million of their own money into the still-unprofitable brand, Bono and Ms. Hewson sold 49% of the company last year to LVMH Moët Hennessy Louis Vuitton for about $7.8 million. LVMH, the world’s largest luxury conglomerate, helped the company recruit new management and a new designer (Mr. Gregory left in 2007), and then tried to convince the founders to expand their sourcing horizons.

Currently, 15% of EDUN’s products are manufactured in Africa; this particular point led to an interesting conversation on Twitter about whether this means that EDUN is succeeding in its mission, or if in fact it has failed to accomplish what it set out to do. Some argued that EDUN was proving that it was possible to run a for-profit enterprise with a strong commitment to fair and ethical practices. Others – myself included – questioned whether EDUN could be considered successful given how much it seems to be deviating from its original intent.

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I can relate to both sides of the argument here. Bono and his wife set out on a creative enterprise which they hope can become a model. As Hewson told the WSJ in 2009, EDUN is supposed to demonstrate that a for-profit business can be successful and ethical at the same time. This in turn can encourage other businesses to adopt new practices: sourcing products (and not just raw materials) from factories with strong labor and environmental standards in developing countries. These are obviously laudable goals that should be supported. However, my concern lies with the fact that Bono and Hewson didn’t actually prove that this was possible through EDUN, given all the issues they encountered in making their vision a reality.

In EDUN’s “mission” section of their website, it seems rather obvious that the focus is strongly on Africa. A rather tedious and unoriginal video of schoolchildren dancing in a school in the slum of Kibera and a slideshow of nameless organic cotton farmers adorn the webpage, along with a “Made in Africa”section, ominously subtitled “coming soon…”

The mission statement talks about about two partnerships: one with the aforementioned school in Kibera, and the Conservation Cotton Initiative in Northern Uganda with Invisible Children (everyone’s favorite advocacy organization) and the Wildlife Conservation Society. Leaving aside the merits of these two initiatives, they do speak to the rather small-scale scope of EDUN’s impact on African manufacturing. Which is precisely why I find it difficult to construe EDUN as a success: they have only very partially achieved their goal of having their fashion clothing line produced in African factories.

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In the WSJ article, Ali Hewson makes it clear where EDUN’s priorities lie: “we focused too much on the mission in the beginning. It’s the clothes, it’s the product. It’s a fashion company. That needs to be first and foremost.” Now this makes perfect business sense – a good company sells quality, in-demand products at the lowest possible cost in order to maximize revenues. What this suggests, though, is that the fair trade aspect of the mission – while still present – is not a priority. This is reflected in the decision to source a majority of products from China, with only a nominal portion coming from Africa. Furthermore, as EDUN’s website suggests, their efforts in Africa seem to be informed by somewhat vague principles and guidelines.

The problem is that EDUN, under these circumstances, is hardly demonstrating that “doing good while doing well” is a viable way to run a business. In fact, I’d argue quite the opposite. Their initial focus on product marketing (through celebrity ad campaigns and thanks to Bono’s superstar status) rather than on developing a viable, sustainable business model eventually forced them to rethink their model. This is particularly frustrating because EDUN could have easily sought to do its homework properly and anticipate the predictable problems they ran into. Saundra Schimmelpfennig wrote about this exact topic last year, and there are hundreds of entrepreneurs in the same space whose counsel could have been sought.

EDUN failed to learn the lessons of their predecessors’ mistakes in order to make their model succeed has they originally intended. Instead of proving that their business model was viable, they seem to have proved exactly the opposite. If it Bono hadn’t had the ability to throw $20mm of his own money into the company when it was suffering financially, if he didn’t have the kind of prestige that would make LVMH purchase the flailing, unprofitable company, I highly doubt EDUN would still exist today.

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I’m one to be supportive of daring entrepreneurship, both social and commercial, and I do have a lot of respect for people who have the courage to throw their energy into creating a successful enterprise. That said, when it comes to EDUN, I feel that the efforts were superficial, in more ways than one. Had EDUN done better research, they might have come up with a better model than what led them to be pretty much ashamed of the clothes that came from Africa (cf. the party in the dark to draw attention away from the clothes – for a fashion company!?) I don’t think anyone considering investing in African business would look to Bono and EDUN’s example as a model for success… In fact, I would imagine that looking at EDUN would discourage potential investors.

It seems that we don’t hold Bono to the same standards we hold non-rock star entrepreneurs. His mere trying to succeed appears to be enough to endear him to his supporters. Frankly, I feel Bono doesn’t deserve much praise here. If he was truly committed to supporting African cotton farmers, sellers and manufacturers, he could have invested in a few small or medium size clothing factories, for example. Industry in the developing world needs capital and improved operational standards, and there are several organizations which focus precisely on achieving this. The Grassroots Business Fund, for instance, makes equity, quasi-equity, and debt investments in the $250,000 – $1,000,000 range in agricultural and artisanal businesses, as well as access to finance and BoP services.

I understand: EDUN is a fashion clothes line, not an aid project. Fair enough. But then let’s see this for what it really is: one among many lines of clothing designed and marketed by a celebrity, with an ethical “twist.” To say that EDUN is a “game-changing” initiative is giving much too much credit to an enterprise which essentially failed to accomplish the mission it set out for itself.

Social Entrepreneurship in Peru

My friend, managing director of I-Dev International, forwarded me the details regarding a winter break 10 day immersion program for students and young professionals interested in social entrepreneurship, microfinance and corporate social responsibility. Some details are below, but you can read all about the opportunity here.

I’m familiar with their work in Cajamarca, and they’re a great, young and dynamic organization with an awesome team.  I really encourage you to check them out.

I-DEV International’s Doing Development In… (DDI) program was created to give young professionals & students from top graduate programs a realistic, first hand view of how grassroots development, microfinance, corporate social responsibility and social venture capital programs are making a difference on the ground, in communities at the base of the pyramid.

This 10 day immersion program, offered in 2 sessions over the winter holidays, provides participants with a unique opportunity to:

  • Meet & Engage with senior management at top international development organizations
  • Learn the on-the-ground challenges of managing corporate social responsibility programs in developing countries
  • Gain an authentic, first hand view into the daily lives and challenges faced by communities at the base of the pyramid
  • Have a truly unforgettable vacation
  • Also, Cajamarca is not a half-bad place to spend some time over winter break:

    Change (ing the world)?

    Interesting exchange this past week with @transitionland on Twitter. She asked:

    “Does *anyone* really say “I want to save the world”? I’ve never said that. Ever.”

    What immediately came to mind is that probably only Bono wakes up every morning to that thought. Actually, he probably doesn’t just think about wanting to save the world, but likely believes he is already well on his way to accomplishing that goal (but that’s a different story/rant).

    Bono - saving the world?
    Bono - saving the world?

    This spawned a discussion about the different perceptions of the possibility of change – what constrains it, what fuels it and why. Mind you, all in 140 character bites. It got me thinking a bit about change and political systems – how different cultures understand change and evolution at the macro level.

    In 2008, Americans elected Barack Obama, whose main campaign rallying cry was : “Change we can believe in”. Let’s not talk about whether things have actually changed since his election – rather, I wanted to touch on the way in which Americans construe the possibility of change. 

    The belief in the “American Dream” rests upon the assumption that social, political and economic mobility is not only possible, but within the reach of each individual. As Alain de Botton put it in a recent TED talk, in individualistic societies – such as the U.S. – people own their successes as well as their failures. Knowing that your situation can evolve, that hard work pays off, is only as liberating as it is anxiety-inducing: when you struggle to make ends meet, or are on the verge of bankruptcy, it is distressing to think and be told that your failure to succeed is your own fault. There seems to be a pervasive notion in the U.S. that the principles upon which institutions have been founded are not only absolute and timeless, but also designed to create the most advantageous environment for individuals to thrive in.  The fact that the U.S. emerged from the 20th century as the dominant world power, and that, at home, incredible wealth was derived from innovation and entrepreneurship, gives credence to this idea.

    Interestingly, though, this fervent belief in the malleability of one’s life does not translate in the realm of institutions – at least not American ones. Indeed, Americans are extremely attached to the structures laid out in the Constitution, as well as to the institutions that have shaped American life for over two centuries now. Since the Constitution was adopted in 1787, there have been a total of 27 amendments to it – 10 of them, collectively known as the Bill of Rights, were ratified at the same time as the Constitution itself. The 17 amendments that followed mostly “expand individual civil or political liberties, while a few are concerned with modifying the basic governmental structure drafted in Philadelphia in 1787.”

    (In contrast, France has known five Republics since 1789 – each with its own constitution. The last revision of the French constitution, in 2008, modified 39 of the 92 articles, created nine new ones, and repealed three constitutional provisions. Only 32 of the 92 articles have not been modified since 1958, when the Constitution was adopted. Compare this to the 27 changes the U.S. Constitution has known in 220 years of existence, and that gives you a sense of the trust Americans place in their system.)

    I was an undergraduate during the time the U.S. launched wars in Afghanistan and Iraq, and I remember discussing whether “Western-style democracy” could take root in those places, and what would make this more – or less – likely. Almost invariably, arguments about a country’s prior experience of democracy would come up, with the implication that nations with a history of democracy are more amenable to introducing and upholding the institutional changes necessary for democracy to flourish. 

    I always thought this line of argument was short-sighted. Democracy – or, rather, the democratic/liberal model – only truly began to take root in Europe following centuries of authoritarianism. The last two and half centuries have profoundly changed the way in which Western societies function. Without retracing the complex and rich history of Western political thought, the Enlightenment, and what Nietzsche called the “death of God“, had a lot to do with shaping the intellectual and political framework for monumental changes to occur in Western societies. 

    The transformation of the West from authoritarian, dogmatic, stratified societies to what we have today took place over long stretches of time. Indeed, it takes decades, if not centuries, for profound changes like the ones experienced by countries such as France, Germany, the UK or the U.S. to take root. Which is why, when it comes to development and democratization, we have to take the long view and recognize that while it is possible for nations and countries to experience and sustain systemic political, economic and social transformations – as exemplified by the evolution of Western societies over the last 250 years – these processes take time. 

    In the age of globalization, where expectations of instant gratification (and of instant everything) are the norm, it is easy to become cynical about our ability to affect change and make a difference in the world’s less privileged places. For those working in international development/aid/human rights, it can be particularly disconcerting. The changes which are widely recognized as necessary (for example, the empowerment of women worldwide) cannot – and will not – happen overnight, no matter how many millions of dollars we throw at the problem. It can be very disconcerting for people in this field to spend years working on a project that depends on fickle funding cycles, while they themselves dependent on whether the project or initiative actually delivers quantifiable, measurable results. 

    While I strongly believe that monitoring and evaluation is absolutely critical for ensuring accountability, there are often externalities created by a project that cannot be captured in a convenient Excel spreadsheet. While in recent years there have been more and more attempts at measuring social impact at the Bottom of the Pyramid, it is very hard to estimate the long term benefits (or negative impacts) of work that seeks to induce change. Ultimately, we are only able to measure incremental changes in development. The very notion of development rests on the assumption that there is a linear path to follow, from underdeveloped (or LDC, least developed countries), to developing (or middle income countries) to developed (or rich, industrialized nations).

    Considering how long it took for Western societies to evolve, we should have a more humble approach to this – clearly, no one, not even Bill Gates and his billions, can create immediate, systemic change overnight. This isn’t to say that we should therefore be despondent and that efforts aimed at change are meaningless. Rather, I’m inviting readers – particularly the more cynical, jaded ones – to mull over the fact that initiatives aimed at change can (and most likely will) take generations to succeed. And that there is value even in very small, marginal changes. It is precisely these efforts that, over time, create the conditions necessary for social, political and economic evolution (revolution?) to occur. We needn’t be impatient, but we should be humble and acknowledge that initiatives carried out today may not have an immediate, game-changing impact. 

    For the past half century or so, and through various channels, the democratic/liberal model has been pushed upon the parts of the world which have yet to adopt it. In the early 1990s, Western leaders seem to have all read and integrated the lessons from Francis Fukuyama’s “The End of History“, in which he writes that the defeat of the USSR in the Cold War signaled the victory of the liberal democratic model. The so-called Washington Consensus led the Bretton Woods institutions and Western aid donors to push the developing world to adopt politicies that create the environment necessary for unfettered progress: lower barriers to trade, privatize industry and an insistence on macro-economic stability – all at any cost.

    Today this one-size-fits-all approach to development has all but been rejected. What’s interesting about the failed Washington Consensus is that it makes quite clear that a country’s political and economic model cannot be forced or expected to change through policy prescriptions, however comprehensive and far reaching they may be.

    No fire without smoke

    From Nextbillion.net, a piece entitled “The Dark Side of Remittance Economies” asks:

    In Development and Base of the Pyramid circles, we often discuss remittance economies and innovative ways to send remittances home; what we don’t always think or talk about is what forces people to leave their home countries in the first place and what they experience when they go abroad. In the case of Nepal, as I’ve written about before, migrant laborers most often
     travel to the Middle East and Southeast Asia, often having their passports taken away from them upon arrival and not getting paid for months at a time. So would systems that facilitate sending remittances home actually encourage and facilitate such an unjust ecosystem? 

    First off, having your passport taken away and not getting paid for months at a time constitutes slavery (Article 1 of the Supplementary Convention on the Abolition of Slavery). Incredibly, slavery remains a major issue today, as more than 27 million peoplelive their every day in slavery or slavery-like conditions.” And while not all enslaved persons are migrant laborers (and of course, vice versa), it is true that many economic migrants end up in terrifying situations. As noted by the UN Special Rapporteur, “Some of the most traditional forms of slavery such as debt bondage [have] evolved and now manifests [themselves] in the plight of some migrant domestic workers.”

    Remittances from migrant workers, however, are one of the most stable, largest sources of capital for many developing countries, more so than official development aid (ODA) or foreign investments. Moreover, remittances are actually more reliable and tend to be counter-cyclical. While remittances are going to decline this year, along with ODA and private investments, they will decline less. According to the Migration and Remittances Group at the World Bank, “despite the prospect of a sharper decline in remittance inflows than anticipated earlier, these flows will remain more resilient compared to many other types of resource flows such as private debt and equity flows and foreign direct investment, which are expected to decline or, in the case of portfolio flows, perhaps become negative in 2009 as foreign investors pull out of emerging markets.”

    To be clear: the most sustainable form of capital flows to the developing world is not only in decline, but in its current form, relies – at least in part – on modern forms of slavery and forced labor. Indeed, for these flows to remain stable, millions of people have to endure harrowing trips across, and sometimes between, continents. There are more than a few stories about boat loads of migrants that capsize, end up shipwrecked, with their occupants arrested, and often deported

    It’s an incredible shame that there aren’t better systems in place to promote a much healthier form of migrant labor – in Spain, for example, the government used to run a program to recruit foreign workers in Morocco and Latin American countries, based on the labor needs expressed by industry groups. These people were given temporary work authorizations and were subject to quite strict verifications – nonetheless, their conditions of employment were far, far better than what most can expect when immigrating on their own. 

    Mustafa, 26, Somalia: « The travel took me one year through the desert and Five days of sea. The sea was unstable, twenty-five people where on the boat at the beginning, but only fifteen people arrived in Malta. » Février 2008. © Pierre Le Tulzo

    Understanding the poor?

    I’ve been neglecting my little corner of the internet these past couple of weeks… Blogging can be a serious “monkey on your back” situation, and the more I put it off, the less motivated I become to write. Also, the fact that I’ve been doing a lot of writing and editing at work every day probably compounds this… Anyway, poor excuses. There is a lot I want to share, like for example (and in no particular order), my impressions of Peru, the value of a trillion dollars, Obama’s greying hair and the ICC indictment of President Bashir (great article by Alex de Waal, who is The Authority on Darfur).


    But I won’t… Not today, at least (although chances are I will never write about Obama’s hair). One of my colleagues forwarded an article from the Stanford Social Innovation Review a few weeks back, noting that the last couple paragraphs completely jive with our organization’s mission (hurray! I agree with the conclusions of the article, and it gave me a warm fuzzy feeling that I spend my days working for an organization that embraces those principles) 

    The author, Aneel Karnani, makes a lot of good points in this article called “Romanticizing the Poor”. He lays to rest a lot of misconceptions about the business opportunities that exist at the bottom of the pyramid – his main thesis is that poor people are not necessarily aspiring entrepreneurs (as many advocates of microfinance see it), nor are they particularly discerning consumers (as corporations like to portray). Excerpt:

    Beneath these beliefs in the market readiness of poor people lies a more basic assumption: people in dire straits are well-informed and rational economic actors. Yet this view denies the fact that poor people often act against their own self-interest. Of course, wealthier people sometimes do so, too. But poor people face far worse consequences for their bad choices than do more affluent people. And so romanticized views of BOP people as value-conscious consumers and resilient entrepreneurs are not only false, but also harmful. These views lead states to build too few legal, regulatory, and social mechanisms to protect the poor, as well as to rely too heavily on market solutions to poverty.

    To support his views, he makes a number of compelling (and honest) arguments that deconstruct a “romanticized” vision of the poor, which rests on the assumption that they are rational economic actors. Of course, because he’s talking about billions of people in a general way, these are clearly sweeping generalizations – but like all generalizations, there is a lot of truth to what he’s saying. 

    He notes, for example, that people who live in poverty tend to spend inordinate amounts of money on celebrations, festivals and what I will call, broadly speaking, escapism (he cites a recent field study in Sri Lanka which reveals that more than 10% of poor male respondents regularly spend their entire incomes on alcohol). This really resonates with me – I am still unable to understand why Liberian refugees in Ghana needed to have a costly “Miss Liberia” pageant, or make t-shirts for every last occasion of the year (you essentially cannot be a “real” organization or club until you have a t-shirt with your motto and logo on it). That always struck me as an immense waste of resources, particularly in a context of complete and utter need – you wouldn’t be pressed to find someone telling you about their t-shirt order and in the same breath asking you for money to buy food/water/go to the clinic.

    I remember trying to organize a half day workshop on nutrition for the staff of the school I was volunteering at – I drew up a budget, and discussed it with my local colleague. He pointed out that my food/refreshment line item was quite small – indeed, I had only accounted for the purchase of water and some basic snacks. He explained that “no one would show up” unless I had the event catered and everyone got a “soft drink”. Yes – catered. In the end, most of the costs of the workshop were food related. I thought this was because I was white and therefore incredibly rich, of course, that people expected this. But time after time, I heard about these “catered workshops” during my time in the refugee camp.

    Another trend which Karnani points to is how corporations take advantage of the lack of regulations in order to market products that are detrimental to a person’s health – such as liquor in very small (and therefore very affordable) packages. This brings up another memory: small sachets of rum that would litter the ground of the refugee camp. Except they weren’t being made by large foreign corporations but by smart local entrepreneurs – these are the guys who are really taking advantage of business opportunities at the bottom of the pyramid. This is a point I disagree on slightly – Karnani says: “It is not only tobacco and alcohol companies that exploit the weaknesses of the poor: Even Unilever, a consumer products company, preys on the anxieties of disadvantaged people” Umm… wait: it’s not only tobacco and alcohol companies marketing to the poor that exploit weaknesses – that’s what every single company that markets a non-essential product does!! Everyone on the planet is subject to shameless marketing, not just the poor. The difference is, though, is that I know I don’t “need” a blanket with arm holes (even though I know a lot of people who would fight me on this, but bear with me). At the bottom of the pyramid, as Karnani writes,

    ” …yet these advocates do not acknowledge that the poor lack the education, information, and other economic, cultural, and social capital that would allow them to take advantage of—and shield themselves against—the vagaries of the free market.”

    I think he nails it with that sentence.

    I really think that it ultimately boils down to education – what I’m talking about though, goes much beyond the Millenium Development Goal of providing primary education to all the world’s children by 2015 (that ain’t happening, by the way). In my mind, “education” comprises formal education at all levels, including the promotion of university or technical degrees, as well as skills and knowledge transfer. For micro, small and medium size enterprises, good leadership and sound management are essential for success – neither of these skills is born out of thin air, and individuals need to somehow acquire them. A direct result of this is the increased premium places on capacity building and technical assistance as crucial complements of financing for any informal organization or business in the developing world.

    As Karnani accurately notes, for individuals to “take advantage of and shield themselves from the vagaries of the free market”, a strong regulatory framework is imperative. Consumers need to be protected and industries promoted, controlled and appropriately incentivized – isn’t that what we ask from our own governments? (well, perhaps Rush Limbaugh disagrees…) 

    An interesting and rather intense debate took place over at Nextbillion.net regarding this piece – one of the scholars that Karnani criticizes in his piece, Al Hammond, responds to Karnani in no uncertain terms. I highly recommend checking out the vitriolic back and forth. Here‘s a softer response to Karnani’s article.

    Karnani’s article is a must-read – as my good friend CPL said, “that’s one of the best most honest pieces I have read in a long time.”

    Oh, and here are a couple of photos from my trip to Peru


    From 2009 pics

    This man owns and runs a cheese factory/shop in the mountain town of Cajamarca, Peru. He started his business about 10 years ago, and now sells cheese in different regions of the country – his marketing strategy was developed with the help of a local economic development organization. He told us his story and showed us around his facilities, describing which challenges he faced as a small business owner – very enlightening. I’ll admit the cheese wasn’t really all that great (I’m from France… I have discerning taste in cheese), but on the other hand the dulce de leche (displayed in the center of the photo), was amazingly good. 



    From 2009 pics

    And this is “Lima-by-Night”, viewed from the neighborhood of Barranco (I want to live there). Yes, it’s a ginormous illuminated crucifix.